The most popular products that banks offer include personal loans. Most banks, including traditional branch banks, also offer loans online. The granting of loans is tied to certain criteria that are identical for most banks.
What do the banks pay attention to?
Before the banks approve a loan application, they review the applicant to minimize the risk of the applicant becoming insolvent. The following points are checked:
- Entries with Credit Bureau (except for Credit Bureau-free loans)
The Credit Bureau has information on the majority of German citizens, including data on current payment obligations, payment delays, failed debiting of accounts, affidavits, consumer bankruptcy and others.
Income is checked to see what the disposable income is per month. Not only the amount of income (at least 1,100 USD net for singles), but also existing financial obligations such as maintenance or installment payments play a role. The type of employment relationship is also checked. It must be permanent and have been with the same employer for at least one year. Age also plays a role. In order to apply for a loan, the applicant must be at least 18 years old and have legal capacity. From a certain age (60 years) it becomes increasingly difficult to apply for a loan. There are only a few providers that approve loans for older age groups or pensioners. The creditworthiness (creditworthiness) is checked for all loans, even those without a request from Credit Bureau.
What should the applicant pay attention to?
When applying for the loan online, it is best to fill in the correct information as the information is verified. Manipulation of payslips or pay slips violates legal regulations. Banks do not count benefits such as unemployment benefit, Social Welfare, child benefit, housing benefit, parental benefit and others as income.
If an application for a loan is rejected, the reason for the rejection should be asked. If the application is rejected because of poor creditworthiness, there is no point in re-applying to another bank. The other bank checks according to the same criteria and comes to the same result. If the application is rejected due to negative entries at Credit Bureau, it is worthwhile to obtain free self-assessment there.
Everyone is entitled to this once a year. It is not uncommon for Credit Bureau information to be incorrect or out of date. For example, loans or installments that have long been settled can be saved. In the self-disclosure you can see which data Credit Bureau has saved and can request a correction.
What to do if your credit rating is poor?
You can improve your creditworthiness by increasing your monthly income, for example with a part-time job. Alternatively, a guarantor can also sign the loan application. The guarantor undertakes to repay the loan if the borrower is no longer able to do so. For this, the guarantor must have a good credit rating.
If you have neither guarantors nor collateral, you can also try to borrow money from private donors. There are pages on the Internet for this. The criteria are less stringent there.